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Changing Compensation Costs in the San Jose Metropolitan Area – December 2018

Total compensation costs for private industry workers increased 3.6 percent in the San Jose-San Francisco-Oakland, Calif. metropolitan area for the year ended December 2018, the U.S. Bureau of Labor Statistics reported today. Assistant Commissioner for Regional Operations Richard Holden noted that one year ago, San Jose experienced an annual gain of 3.4 percent in compensation costs. Locally, wages and salaries, the largest component of compensation costs, advanced at a 3.8-percent pace for the 12-month period ended December 2018. Nationwide, total compensation costs increased 3.0 percent and wages and salaries rose 3.1 percent from December 2017 to December 2018. (See chart 1 and table 1.)

San Jose is 1 of 15 metropolitan areas in the United States and 1 of 4 areas in the West region of the country for which locality compensation cost data are now available. Among these 15 largest areas, over-the-year percentage increases in the cost of compensation ranged from 5.0 percent in Minneapolis to 0.6 percent in Seattle in December 2018; for wages and salaries, Minneapolis registered the largest increase (5.2 percent) while Houston registered the smallest (1.9 percent). (See chart 2.)

The annual increase in compensation costs in San Jose was 3.6 percent in December 2018, compared to advances that ranged from 3.8 to 0.6 percent in the three other metropolitan areas in the West (Los Angeles, Phoenix, and Seattle). San Jose’s increase in wages and salaries over this 12-month period was 3.8 percent. The other three western localities ranged from 4.1 to 3.7 percent. (See table 2.)

Locality compensation costs are part of the national Employment Cost Index (ECI), which measures quarterly changes in compensation costs, which include wages, salaries and employer costs for employee benefits. In addition to the 15 locality estimates provided in this release, ECI data for the nation, 4 geographical regions, and 9 geographical divisions are available. (Geographical definitions for the metropolitan areas mentioned in this release are included in the Technical Note.)

In addition to the geographic data, a comprehensive national report is available that provides data by industry, occupational group, and union status, as well as for both private, and state and local government employees. The release is available on the Internet at www.bls.gov/ncs/ect/home.htm. Current and historical information from other Bureau programs may be accessed via our regional homepage at www.bls.gov/regions/west/.

The Employment Cost Index for December 2018 is scheduled to be released on April 30, 2019.

Technical Note

The Employment Cost Index (ECI) measures the change in the cost of labor, free from the influence of employment shifts among occupations and industries. The compensation series includes changes in wages and salaries and employer costs for employee benefits.

Wages and salaries are defined as straight-time average hourly earnings or, for workers not paid on an hourly basis, straight-time earnings divided by the corresponding hours. Straight-time wage and salary rates are total earnings before payroll deductions, excluding premium pay for overtime, work on weekends and holidays, and shift differentials. Production bonuses, incentive earnings, commission payments, and cost-of-living adjustments are included in straight-time earnings, whereas nonproduction bonuses (such as Christmas or year-end bonuses) are excluded. Also excluded are such items as payments-in-kind, free room and board, and tips.

Based on available resources and the existing ECI sample, it was determined that estimates would be published for 15 metropolitan areas. Since the ECI sample sizes by area are directly related to area employment, the areas with the largest private industry employment as of the year 2000 were selected. For each of these areas, 12-month percent changes and associated standard errors were computed for the periods since December 2006.

The Employment Cost Index (ECI) measures the change in the cost of labor, free from the influence of employment shifts among occupations and industries. The compensation series includes changes in wages and salaries and employer costs for employee benefits.

Wages and salaries are defined as straight-time average hourly earnings or, for workers not paid on an hourly basis, straight-time earnings divided by the corresponding hours. Straight-time wage and salary rates are total earnings before payroll deductions, excluding premium pay for overtime, work on weekends and holidays, and shift differentials. Production bonuses, incentive earnings, commission payments, and cost-of-living adjustments are included in straight-time earnings, whereas nonproduction bonuses (such as Christmas or year-end bonuses) are excluded. Also excluded are such items as payments-in-kind, free room and board, and tips.

Based on available resources and the existing ECI sample, it was determined that estimates would be published for 15 metropolitan areas. Since the ECI sample sizes by area are directly related to area employment, the areas with the largest private industry employment as of the year 2000 were selected. For each of these areas, 12-month percent changes and associated standard errors were computed for the periods since December 2006.

The metropolitan area definitions of the 15 published localities are listed below.